Hang In There Payday Loan Fans! The Future is Ours!!

Hang In There Payday Loan Fans! The Future is Ours!!

Payday Loan, Car Title Lenders, Check Cashers and all the rest of us in the micro-lending niche will survive. In fact, we’ll thrive.

How can I say this? How can I be so certain?

First, let me share with you the catalyst for this rant.

I got into payday loans, car title lending and check cashing in 1997 when I opened my first store in Mission Viejo, Calif. It was the early days and nobody in my world even knew what a payday loan was. I attended my first National Association of Check Cashers Convention (now called FISCA), networked, attended the workshops and left feeling really upbeat about the future of the payday loan industry and micro-lending in particular.

Everything was going great. Sure, there were always rumblings about regulators in a few states getting their feathers ruffled after prodding by The CRL or some other anti-business, anti-capitalist, anti-financial choice group. But I came to realize we enjoy a huge demand by consumers for our products and services. And we have some really smart and creative people in our industry.

Then October 2003 came along. I was at the FISCA Convention (I think it was at The Broadmoor in Colorado) when the FDIC announced all federally chartered banks involved in payday loan lending would have to increase their reserves to 1:1. Additionally, the FDIC advised that banks should ensure that payday loans are not provided to customers who have had payday loans outstanding from any lender for a total of three months in the previous 12-month period. “FDIC-supervised institutions currently engaged in payday lending are instructed to submit plans detailing how they will address the revised guidance.”

This announcement swept like wild fire through the halls of the convention. Shares of publicly traded payday loan lenders and check cashers plummeted that day. Valuations of brick-n-mortars plunged! “There would be no financing available in the future for our industry.” Stephens Investment Bank dutifully reported M & A action in our market segment was “dead” for the foreseeable future. Fully a third or more of the convention attendees freaked out. It was they said, “The end of our industry.”

Many operators bailed. They sold out; some at fire sale prices. (I know that many of these sellers eventually came back to our industry. They couldn’t stay away :o)

And then a funny thing happened; our industry survived. Store revenues increased. Transaction volume increased. The Internet began to play a role. CFSA was formed and eventually the OLA .

I don’t know the date you’re reading this. It doesn’t even matter. Just be aware that the regulatory and legislative issues discussed here are a universal theme, so keep reading. You’ll be glad you did! It’s very optimistic!!

Now don’t get me wrong! There have been more bumps and grinds along the way. The payday loan advocates in Georgia were defeated by GILA . Oregon went down the tubes. Arizona and Ohio were tough battles. Virginia is edgy. And there were others! (By the way, don’t think the residents of these “dark” states are no longer getting their payday loans and car title loans; they most certainly are. They simply aren’t walking into a store in their state. Instead, they’re using the Internet,they’re driving across state lines, they’re calling 800#’s… meanwhile there are fewer jobs in their state. There is more crime in their state. Fewer taxes are being paid in their state. Vacancy rates for commercial buildings are higher in their state. And the fees that licensed payday loan and car title loan businesses were paying to their State are now non-existent. I guess that’s the subject of another rant!)

But it’s not all doom and gloom for us!

Here’s just a few reasons why we will overcome!

It will be 12 to 24 months before anyone in Washington even reads the 2300 page Consumer Financial Regulatory Agency Proposal. It will take months and months to form the committees and boards required to attempt to oversee our industry. There will be massive lobbying by the banks, the credit card companies, the automobile dealers, and our own organizations including OLA, FISCA and CFSA creating a lot of “give-and-take.” Who knows what the ultimate outcome will be. I’m certain we will evolve into whatever it takes. (For more on this read USA Today’s description of past failures of new financial regulatory reform out of Washington.

And there’s technology. Technology is in our favor. Technology knows no boundaries. Pay attention to Internet solutions. Get acquainted with “peer-to-peer” lending. Educate yourself regarding the origination of the Grameen bank and Muhammad Yunus who won the 2006 Nobel Peace prize for micro-lending. Do you know what he’s doing in New York and Pennsylvania today? Take a look at the Kiva Model and Prosper and Lending Club. Here’s a Business Week article offering some further insight into peer-to-peer lending:

Acquaint yourself with installment lending, open-end credit agreements, closed-end credit agreements, the Credit Services Organization (CSO) Model, collateralized and non-collateralized loans… (all of these are discussed in our Training Manual at PaydayLoanIndustry.com .

And don’t forget to learn what you can implement in your specific location/ model regarding setup fees, one time application fees, credit check fees (even if it’s simply Teletrack), referral fees, check cashing fees, connection fees…

MOST IMPORTANTLY, let us not forget about our customers! THEY NEED US JUST LIKE WE NEED THEM. They’re out there by the millions in the USA, the UK, Canada, Australia, New Zealand, Korea, Japan; they’re EVERYWHERE! And our customers DEMAND our product! They WANT our product! They MUST HAVE our product!

We simply have to organize better, support our industry organizations better, join forces with complementary industries, and prod our customers to support us with videos, email, letters and face book accolades. Most importantly, we must EVOLVE into whatever we need to be in order to SERVE OUR CUSTOMERS. No matter what the Regulators do, OUR CUSTOMERS WANT US! CUSTOMERS NEED OUR HELP! AND WE DESERVE TO MAKE A PROFIT SERVING THEM!!

So… with no end to consumer demand for our products and services in conjunction with an industry composed of some of the most intelligent and creative men and women on the planet, I’m 100% certain the payday loan, car title loan, check cashing …the whole micro-lending niche will not only survive but prosper in the coming decades.

Educate yourself! Read this PaydayLoanIndustryBlog.com . Read The Payday Loan Pundit . Read Nick’s stuff at PDLIndustry.com .

Consumer Financial Service Centers are our destiny! Evolve!! Adapt!! Create!!! You’ll prosper!!!!

Comments ( 8 )
  • Nate in Missouri says:

    I remember hearing about a similar situation where the product/service was badmouthed until it was actually banned nationwide! i am speaking of prohibition of course and as history proves, with enough demand, the people will get the supply they desire. Eventually the regulators will see the pros of our industry compared to what is currently offered or lack thereof, and follow suit. Be of good cheer, each new day gets better and better for people in our business.


    • Payday Loan Industry says:

      Great point, Nate! Creative entrepreneurs will continue to develop methods and products to serve our customers and help them overcome their financial challenges. Additionally, the competition will drive down consumer rates while technology will address defaults.

      Jer – Trihouse

  • paul says:

    i am glad to see some positives in the payday loan industry. As said above, there was and is a lot of gloom and doom out there. We are not “loan sharks”. Payday cash advances fill a niche that caters to consumers when there is a need. We need to keep providing these services even when it seems there is so much negative press out there. Thank you.

  • Austin says:

    The payday loan industry may seem to be struggling with all the new laws appearing against them, but they will prevail. The government doesn’t have the right to mandate how citizens choose to spend their money. I’ve read a lot of blog posts recently that compare it side by side with gambling in casinos, but it isn’t fair to international industry to compare them as such. Thank you for the insightful post.

  • Sabastian Miller says:

    Choosing the right payday loan to apply for can be hard, because there are a lot of them on the market. Most people are in such a hurry to get the cash that they need that they apply for the first one that they see. It is smart to do your research before you apply for one.

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  • Michael says:

    Finally something positive about the payday loan business. I’m sick of all the doom and gloom I’ve been reading lately. As a vendor in the PDL industry, it’s comforting to share ideas with Jer and others who realize consumers need our products and services. Lot’s of resources in this Post; I’ve got lots of reading and research ahead of me but I tip my hat to you guys!!

  • Carlos says:

    Great Post, Jer! I really appreciate your putting payday loan regulatory issues in perspective. I’m fairly new to the payday loan and car title lending industry. I’ve been getting kind of down lately. I think I simply forgot how much my customers really need my services. And you’re right! My customers aren’t going away. I just need to evolve!!

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